Agencies Beware! The Light Is Shining On Commissions.
March 21, 2015
In the run-up to the General Election the property industry’s focus has been on the prospect of tenant fees being banned.
There is a risk that with a deluge of commentary about this prospective change a recent case with significant effects on estate and letting agencies’ revenues has been overlooked.
The Background
Agencies may use their purchasing power to extract savings or to get other benefits (eg services that benefit their agencies) from a range of ancillary service providers including:
- solicitors
- tenant referencing companies
- utility providers
- contractors
While they may receive a commission in money or in kind on those services their client may end up paying less.
No harm no foul? Think again!
The Case
In the case of FHR European Ventures LLP vs. Cedar Capital Partners LLC [2014] UKSC 45 (FHR) the Supreme Court found that any secret or hidden commission that an agent receives is money that is held on trust for their principal.
While the facts of FHR centred on the sale of the Monte Carlo Grand Hotel the potential impact for agencies is clear.
The Impact
As an agent you are acting on behalf of a vendor or a landlord.
In either situation you are in a position of trust and you must declare commissions, mark-ups and/or introductory fees you receive to your client if you earn them as part of your engagement by your client.
FHR mirrors the advice on an agent’s duty of loyalty in the Competition and Markets Authority (CMA) Guidance for Lettings Professionals that states:
“This duty also restrains agents from making ‘secret profits’, meaning money the agent is paid in addition to their agreed commission from the landlord client, and which the landlord client does not know about. So, for example, you should tell the landlord of any sums you propose to charge potential tenants, and disclose any commissions or other benefits you receive from workmen for passing work to them.”
What Should You Do?
Transparency is key. If in a transaction you make money (other than fees from your client) as a result of your position as agent and you want to be able to keep that money then your client needs to know what you are doing.
Your terms and conditions should clearly state what (if any) additional amounts you will make and you should bring those terms to your client’s attention.
Industry Comment
Alistair Spencer a solicitor in the litigation team at Brethertons solicitors notes:
“This judgment is an important clarification and expansion of the existing rule that an agent must account to his principal for any secret commission received in the course of his acting as agent for the principal.
If an agent accepts commission or some other undisclosed benefit whilst in a fiduciary relationship with its principal then this will be held on trust and the principal has a proprietary claim to it. If the agent became insolvent the principal would then have priority over the agent’s unsecured creditors and the principal would also be able to trace and follow the money in equity.
To ensure they do not fall foul of their fiduciary duties to their principal, agents must ensure they disclose details of any arrangements they have for any secret commission to their principal who can then make an informed decision as to whether they are prepared to agree to such arrangements. Obtaining the informed consent of the principal to such fees is absolutely key in these situations as without such agreement any commission or benefit would belong to the principal who would be entitled to take action to recover the same.”
About Fixflo
Fixflo is the multi-awarding winning repairs software system that is trusted by hundreds of agencies across the UK.
The Fixflo system is integrated with or works seamlessly alongside all of the leading agency software systems.
You May Also Enjoy
How to Clean Your Rental Property for a Full Deposit Return
Although it is a dreadful chore, sprucing up your flat at the end of your tenancy is vital if you want your entire deposit back. When it comes to cleaning, landlords and property managers usually have high standards. Any oversight could cost you part of your initial payment. Having said that, your property can look…
Read More 
Two-year mortgage deals the lowest they’ve been since 2022 – but will they remain?
New research from Moneyfacts has shown that two-year mortgage deals are at the lowest they’ve been in two years and have also fallen to their biggest margin in over six months. The current average mortgage according to research is at 5.18%, having fallen by 0.14% in the past month. Meanwhile, five–year rates currently stand on…
Read More 
CP12 Landlord Certificates: What They Are and Why You Need Them
If you’re a landlord in the UK with gas appliances in your rental property, you’re legally bound to ensure they’re safe. That’s where the CP12 certificate for landlords enters the picture. Also called a Landlord Gas Safety Record, the certificate assures that your property’s gas installation is safe and in accordance with regulations. Yet, despite…
Read More 
Horse Guards Parade property prices up 17% since last Trooping the Colour
The latest property market analysis from London’s number one lettings and sales estate agency brand*, Foxtons, has found that it’s not just military prowess on show during Trooping the Colour this weekend, as house prices within the SW1A postcode, home to Horse Guards Parade, have soared by 17.3% over the last year, demonstrating the pedigree…
Read More 
What landlords need to know about the upcoming Renters Rights Bill
The government’s long-awaited Renters Rights Bill is one of the most significant overhauls of the private rental sector in decades. While it has not yet received royal assent, the legislation is expected to come into effect late this year, or early in 2026. With the bill moving closer to becoming law, Steven Bond, managing director…
Read More 
Breaking Property News 12/06/25
Daily bite-sized proptech and property news in partnership with Proptech-X. The Renters’ Rights Bill: What Letting Agents and Landlords need to know The Renters’ Rights Bill is shaping up to be one of the most significant pieces of housing legislation in recent memory. As it moves steadily through Parliament, with Royal Assent anticipated in…
Read More